Episode 6: BeReal.

Wednesday, April 13, 12:44 AM

ding

You have two unread messages.

Admittedly, I had no idea about BeReal until about a couple weeks ago. Also, admittedly, I have been a daily active user since.

Well played, BeReal. Let’s explore how.

BeReal? BeReal.

At a seemingly random time per day, you’ll get a notification to snap a picture of what you are doing at that moment. Why? To stop curating your content and share an authentic version of yourself.

Even when the app was down, the team did not fret. Their goal is to build a new kind of social network. No followers. No filters. Just friends, living life.

Pretty cool, huh?

Anyways, let’s learn about this startup.

First, some housekeeping items surrounding publicly available data.

1. March 2021 = 10K Daily Active Users (DAUs) → April 2022 = 2M+ DAUs

2. Most recently closed a $30M round backed by a16z, DST, and Accel at a $150M post-money valuation

3. #2 in Social Networking on the Apple App Store

Alright, let’s get to it.

The most important thing to look for in an early-stage startup is product-market fit and annual growth (both, revenue and users).

Product-Market Fit (PMF)

Product-market fit is hard, but arguably, one of the most important components of a startup. Until it’s uncovered, it’s as if the gears have not clicked. Eloquently put by Marc Andreessen, co-founder and general partner of Andreessen Horowitz, “product-market fit is when people sell for you.” If a startup can crack this, it’s off to the races.

Fast forward a couple of weeks after I initially heard about BeReal, I noticed it snuck into conversation with friends. Pro tip: If you ever find yourself talking about a company, write it down and try to figure out how it happened. Clearly, they did something right.

In the case of BeReal, it looks like they’ve cracked the code. I believe it has to do with a concept called real-world virality.

Virality is the phenomenon of users recruiting new users. From the texts I’ve received, it looks like the team at BeReal has exploited this phenomenon.

My hypothesis is the app’s emphasis on authenticity hooks users. It’s the antithesis of all the big social media platforms, and funny enough, it’s exactly what users want. If you don’t believe me, why do you think finstas picked up steam a couple years back? It’s because people wanted to see an authentic version of their friends and share an authentic version of themselves. BeReal saw a problem, solved that problem, and the users of the platform are thanking the company by sharing it with their friends.

Network Effects

What’s really impressive is when a network effect is necessary for a platform to have value, it can be extremely difficult to get a product off the ground. Especially when competing against the existing network effects of our modern big tech companies. Like imagine if you made a SnapChat and there wasn’t anyone to snap. You would delete the app immediately.

Kudos to the BeReal team for making it happen. If there continues to be buzz and positive word-of-mouth, more people will continue to join the app and enhance the network. The app’s authenticity and spontaneity is magnetic and paving the way to its explosive growth.

Annual Growth - Revenue

Though the company hasn’t yet generated revenue, it isn’t uncommon for a tech company. Often times, valuation methods in the technology sector are driven by the conviction and story. Given how difficult it is for social media companies to strike a cord, there seems to be a lot of attention from VCs placing their bets on growth and worrying about monetization later. Though it’s at the back of mind for many, let’s take a look at how this may play out.

The company is aiming to be a new kind of social media meaning its monetization strategy will have to be unique. Historically, social media companies have turned on the monetization engine through the form of advertisements. The product of our current social media giants are their users (i.e. you and me). Advertisements and attention are sold to companies and in return the users have a free product to use. If BeReal is to stick to its promise as a new kind of social media, it will need to find a creative way to incentivize users to be the customer. This may come in the form of a premium subscription, dating service, or exclusive groups.

As of right now, it's in the air.

Annual Growth - Users

The best metric to evaluate user engagement is to evaluate how many daily active users (DAUs) are on the app weekly or monthly. Without looking under the hood, I can only assume BeReal’s DAU figures blow it out of the park. The daily dose of spontaneity and the post-to-unlock feature enable this app to have high user engagement. My thesis is spontaneity drives adoption and the post-to-unlock feature drives engagement. Smart play by the team to strategically use FOMO. Well played.

Though I’m not sure exactly what their user engagement metrics look like, on average around 25% to 40% is a good place to be in. If you take a look at the chart below, experts in the space chime in on their opinion of where user engagement metrics should be for consumer social products.

Major Tailwinds

The BeReal team has some major tailwinds pushing them forward. Namely:

1. Product-Market Fit

2. Virality

If they keep it up, it will be easier to test new features and raise incremental rounds of capital. Eventually, the startup will have to find a way to make revenue, but as mentioned earlier, hitting a cord in social is rare. It seems like the team’s number one priority is to maintain and continue user acquisition.

Future Prospects

VCs seem to be circling this company right now, and I wouldn’t be surprised if they raise another round soon. If I were them, I’d heavily consider strategic investors like 444 Capital or SRB Ventures as strong prospects. Influencer-led investment firms can serve as a force multiplier for growth, especially for a consumer social platform.

This post and the information presented are intended for informational purposes only and are not a reflection of my employer. The views expressed herein are the author’s alone and do not constitute an offer to sell, or a recommendation to purchase, or a solicitation of an offer to buy, any security, nor a recommendation for any investment product or service. While certain information contained herein has been obtained from sources believed to be reliable, neither the author nor any of his employers or their affiliates have independently verified this information, and its accuracy and completeness cannot be guaranteed. Accordingly, no representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, timeliness or completeness of this information. The author and all employers and their affiliated persons assume no liability for this information and no obligation to update the information or analysis contained herein in the future.

Episode 6: BeReal.

Wednesday, April 13, 12:44 AM

ding

You have two unread messages.

Admittedly, I had no idea about BeReal until about a couple weeks ago. Also, admittedly, I have been a daily active user since.

Well played, BeReal. Let’s explore how.

BeReal? BeReal.

At a seemingly random time per day, you’ll get a notification to snap a picture of what you are doing at that moment. Why? To stop curating your content and share an authentic version of yourself.

Even when the app was down, the team did not fret. Their goal is to build a new kind of social network. No followers. No filters. Just friends, living life.

Pretty cool, huh?

Anyways, let’s learn about this startup.

First, some housekeeping items surrounding publicly available data.

1. March 2021 = 10K Daily Active Users (DAUs) → April 2022 = 2M+ DAUs

2. Most recently closed a $30M round backed by a16z, DST, and Accel at a $150M post-money valuation

3. #2 in Social Networking on the Apple App Store

Alright, let’s get to it.

The most important thing to look for in an early-stage startup is product-market fit and annual growth (both, revenue and users).

Product-Market Fit (PMF)

Product-market fit is hard, but arguably, one of the most important components of a startup. Until it’s uncovered, it’s as if the gears have not clicked. Eloquently put by Marc Andreessen, co-founder and general partner of Andreessen Horowitz, “product-market fit is when people sell for you.” If a startup can crack this, it’s off to the races.

Fast forward a couple of weeks after I initially heard about BeReal, I noticed it snuck into conversation with friends. Pro tip: If you ever find yourself talking about a company, write it down and try to figure out how it happened. Clearly, they did something right.

In the case of BeReal, it looks like they’ve cracked the code. I believe it has to do with a concept called real-world virality.

Virality is the phenomenon of users recruiting new users. From the texts I’ve received, it looks like the team at BeReal has exploited this phenomenon.

My hypothesis is the app’s emphasis on authenticity hooks users. It’s the antithesis of all the big social media platforms, and funny enough, it’s exactly what users want. If you don’t believe me, why do you think finstas picked up steam a couple years back? It’s because people wanted to see an authentic version of their friends and share an authentic version of themselves. BeReal saw a problem, solved that problem, and the users of the platform are thanking the company by sharing it with their friends.

Network Effects

What’s really impressive is when a network effect is necessary for a platform to have value, it can be extremely difficult to get a product off the ground. Especially when competing against the existing network effects of our modern big tech companies. Like imagine if you made a SnapChat and there wasn’t anyone to snap. You would delete the app immediately.

Kudos to the BeReal team for making it happen. If there continues to be buzz and positive word-of-mouth, more people will continue to join the app and enhance the network. The app’s authenticity and spontaneity is magnetic and paving the way to its explosive growth.

Annual Growth - Revenue

Though the company hasn’t yet generated revenue, it isn’t uncommon for a tech company. Often times, valuation methods in the technology sector are driven by the conviction and story. Given how difficult it is for social media companies to strike a cord, there seems to be a lot of attention from VCs placing their bets on growth and worrying about monetization later. Though it’s at the back of mind for many, let’s take a look at how this may play out.

The company is aiming to be a new kind of social media meaning its monetization strategy will have to be unique. Historically, social media companies have turned on the monetization engine through the form of advertisements. The product of our current social media giants are their users (i.e. you and me). Advertisements and attention are sold to companies and in return the users have a free product to use. If BeReal is to stick to its promise as a new kind of social media, it will need to find a creative way to incentivize users to be the customer. This may come in the form of a premium subscription, dating service, or exclusive groups.

As of right now, it's in the air.

Annual Growth - Users

The best metric to evaluate user engagement is to evaluate how many daily active users (DAUs) are on the app weekly or monthly. Without looking under the hood, I can only assume BeReal’s DAU figures blow it out of the park. The daily dose of spontaneity and the post-to-unlock feature enable this app to have high user engagement. My thesis is spontaneity drives adoption and the post-to-unlock feature drives engagement. Smart play by the team to strategically use FOMO. Well played.

Though I’m not sure exactly what their user engagement metrics look like, on average around 25% to 40% is a good place to be in. If you take a look at the chart below, experts in the space chime in on their opinion of where user engagement metrics should be for consumer social products.

Major Tailwinds

The BeReal team has some major tailwinds pushing them forward. Namely:

1. Product-Market Fit

2. Virality

If they keep it up, it will be easier to test new features and raise incremental rounds of capital. Eventually, the startup will have to find a way to make revenue, but as mentioned earlier, hitting a cord in social is rare. It seems like the team’s number one priority is to maintain and continue user acquisition.

Future Prospects

VCs seem to be circling this company right now, and I wouldn’t be surprised if they raise another round soon. If I were them, I’d heavily consider strategic investors like 444 Capital or SRB Ventures as strong prospects. Influencer-led investment firms can serve as a force multiplier for growth, especially for a consumer social platform.

This post and the information presented are intended for informational purposes only and are not a reflection of my employer. The views expressed herein are the author’s alone and do not constitute an offer to sell, or a recommendation to purchase, or a solicitation of an offer to buy, any security, nor a recommendation for any investment product or service. While certain information contained herein has been obtained from sources believed to be reliable, neither the author nor any of his employers or their affiliates have independently verified this information, and its accuracy and completeness cannot be guaranteed. Accordingly, no representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, timeliness or completeness of this information. The author and all employers and their affiliated persons assume no liability for this information and no obligation to update the information or analysis contained herein in the future.